Benefits of loyalty programs

These are some of benefits that businesses can get by having their own loyalty program;

Greater customer knowledge

A loyalty program facilitates a company to gain detailed knowledge about its customer base. The information will give useful insights as to the lifestyle of the customers and their preferences. This information could be used in creating targeted promotions or reform services around high-value customers’ needs.

83 percent of hotel guests say that personalized service and attention to their needs provides value while staying at a hotel

Customer retention

A well-defined loyalty program improves customer retention rates by increasing the member’s “switching costs”. These are costs associated with changing from one alternative to another competitor. Loyalty programs that create high switching costs to its members will have high retention rates because these members will be reluctant to move into another competitor due to the costs associated in the transition.

Differentiated Service and Brand Equity

While consumers agree that price is important, they’d choose a slightly higher rate for added service. – Forrester, April 2002

Most companies have identified that competing based on cost brings in no or less results. Rather, providing value beyond customers’ expectations is more rewarding. Even those businesses established upon providing a low-cost service (for example low-cost carriers such as Southwest Airlines and JetBlue Airways) find that focusing beyond factors such as price provides them better results. All of the benefits discussed above lead to improved profitability for the business.A loyalty program provides this detailed information on demographics, transactions and personal preferences required to successfully identify groups of customers and then develop products or services that suits those segmented members’ needs.

Improved profitability 

All of the benefits discussed above lead to improved profitability for the business. Greater profits are a result of;

·         Higher customer retention

·         Higher prices paid for products / services

·         Increased average purchase size

·         Reduced marketing costs

·         Decreased unsold inventory

•